TMI Blog1999 (4) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... e loans raised by the assessee for acquiring shares in Raval Tiles and Marbles Pvt. Ltd., with an intention to acquire control over the said company ?" The assessee had purchased, shares in Raval Tiles and Marbles Pvt. Ltd. for Rs. 2.07 lakhs at par after January, 1972. Her husband also purchased shares in the said company during the same period at par of face value of Rs. 1,77,500 and her father-in-law, Korshi Hirji Shah, purchased shares during the same period of Rs. 34,500. Thus the entire shareholding of Rs. 4.19 lakhs in the said company was purchased by the assessee, her husband and her father-in- law in a couple of months after January, 1972. In her assessment for the assessment years 1976-77, 1977-78 and 1978-79, the assessee clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from dividends. The Tribunal accepted the above contention of the assessee and held that the interest paid by the assessee in the above three assessment years was allowable as deduction under section 57(iii) of the Act. Hence, this reference at the instance of the Revenue. We have heard learned counsel for the Revenue who submits that the interest paid by the assessee in this case does not fall within the purview of section 57(iii) of the Act and hence the same is not an allowable deduction in computation of the income of the assessee. Learned counsel submits that deduction under section 57(iii) is allowable only of an expenditure laid out or expended wholly or exclusively for the purpose of making or earning the income referred to in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther sources and that it should not be in the nature of capital expenditure. Section 58(1)(a) further provides that no deduction shall be allowed in case the expenditure is in the nature of personal expenses of the assessee. The question which arises in this case is : whether the expenditure incurred for borrowing money for purchasing shares for acquiring controlling interest in a company can be held to be an expenditure incurred wholly or exclusively for earning income from dividend. There is no dispute in this case that the shares in question were purchased by the assessee for the purpose of acquiring controlling interest in the company and not for earning dividend. That being so, the expenditure incurred by way of interest on the loan ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure for business which was carried on by the assessee at any time during the previous year. It was held that expenditure incurred in proxy war should not be deducted as business expenditure. It may be pertinent to mention the distinction in the language used by the Legislature in sections 37(1) of the Act and 57(iii) of the Act. Section 37 provides for deduction of expenditure incurred wholly and exclusively "for the purpose of business" whereas section 57(iii) provides for deduction only of expenditure incurred wholly and exclusively "for the purpose of making or earning such income". "Such income" refers to "income from other sources". The expression "for the purpose of business" is narrower than the expression "for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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